AEye, Inc.

Previous wording

This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understanding our financial results for the six months ended June 30, 2026, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report, including our condensed consolidated financial statements and accompanying notes.

Current wording

This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understanding our financial results for the nine months ended September 30, 2026, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report, including our condensed consolidated financial statements and accompanying notes.

Previous wording

We believe that our future performance and success depends, to a substantial extent, on our ability to capitalize on the opportunities described herein, which in turn are subject to significant risks and challenges, including those discussed below and the information described in Part II, Item 1A, of this Quarterly Report under the heading “Risk Factors”.

Current wording

We believe that our future performance and success depend, to a substantial extent, on our ability to capitalize on the opportunities described herein, which in turn are subject to significant risks and challenges, including those discussed below and the information described in Part II, Item 1A, of this Quarterly Report under the heading “Risk Factors”.

Previous wording

We anticipate growing demand for our Apollo TM platform across our two major markets, Automotive and Non-Automotive, and we believe this expected growth will enable us to capture market share across both the Automotive and Non-Automotive markets. We plan to pursue opportunities in advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking, while also exploring opportunities in the Non-Automotive market, such as in the railway, airport safety and security, perimeter monitoring, aerospace and defense, transportation logistics, sports analytics, and intelligent transportation systems, or ITS, segments. This diversified approach provides us with multiple opportunities for sustained growth by enabling new applications and product features across a broad range of industries and market segments. However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market demand and customer adoption.

Current wording

We anticipate growing demand for our Apollo TM platform, led in the near-term by Non-Automotive markets such as aerospace and defense, intelligent transportation systems, or ITS, railway, airport safety and security, perimeter monitoring, space mobility, transportation logistics, and sports analytics. Over the longer-term, we continue to pursue Automotive opportunities, including advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking, primarily through our Tier 1 partners. This diversified approach provides us with multiple opportunities for sustained growth by enabling new applications and product features across a broad range of industries and market segments. However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market demand and customer adoption.

Previous wording

Our technology is designed to be a key enabler in certain Automotive and Non-Automotive market applications. Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers. The time to achieve a design win varies based on the market and application. We consider design wins to be critical to our future success, although the revenue that may be generated by each design win and the time necessary to achieve such a design win can vary significantly, making it difficult to predict our financial performance. We have unified our supply chain for the Automotive and Non-Automotive markets and plan to leverage our Tier 1 automotive suppliers to produce products for us to sell into our Non-Automotive markets, whereas in the Automotive markets, we anticipate licensing our technology to our Tier 1 suppliers in exchange for a royalty. The unified supply chain should allow us to leverage the scale, efficiencies, and volume associated with supplying the Automotive market to benefit our Non-Automotive market customers. In 2023, as part of our effort to reduce fixed operating costs, simplify our supply chain, and focus resources on our next‑generation architecture, we wound down support for our legacy Non‑Automotive product. Since launching Apollo TM in 2024, we have seen renewed interest from Non‑Automotive customers across a broad range of sectors and are now actively engaged on multiple opportunities.

Current wording

Our technology is designed to be a key enabler in certain Automotive and Non-Automotive market applications. Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers. The time to achieve a design win varies based on the market and application. We consider design wins to be critical to our future success, although the revenue that may be generated by each design win and the time necessary to achieve such a design win can vary significantly, making it difficult to predict our financial performance. We have unified our supply chain for the Automotive and Non-Automotive markets and leverage our Tier 1 automotive suppliers to produce products for us to sell into our Non-Automotive markets, whereas in the Automotive markets, any participation would be expected to occur through our Tier 1 partners, which may include licensing arrangements. The unified supply chain allows us to leverage the scale, efficiencies, and volume associated with supplying the Automotive market to benefit our Non-Automotive market customers.

Previous wording

In early 2024, we engaged LITEON as our Tier 1 automotive supplier and are actively working with LITEON to bring our product to market. We recently announced an expansion of this relationship and the creation of a dedicated production line for Apollo TM, with capacity to produce up to 60,000 units annually. We believe we are starting to see an inflection point in customer demand, and this expansion ensures we can meet that growth if it develops. This partnership enables us to leverage LITEON’s manufacturing expertise to produce high-quality products that meet stringent performance standards, which is a critical step towards scaling production and delivering our advanced lidar solutions to the market.

Current wording

In early 2024, we engaged LITEON as our Tier 1 manufacturing partner. LITEON manufactures Apollo™ for our Non-Automotive customers and serves as our Tier 1 partner for Automotive programs. LITEON has since established a dedicated production line for Apollo TM, which has a designed capacity of up to 60,000 units annually; however, the production capacity actually available to us depends on the availability of key components and subassemblies, including scanners, and on our order volumes, and is currently substantially lower than that designed capacity. This partnership enables us to leverage LITEON’s manufacturing expertise to produce high-quality products that meet stringent performance standards, which is a critical step towards scaling production and delivering our advanced lidar solutions to the market.

Previous wording

In May 2024, we announced a strategic partnership with Accelight Technologies, Inc. ("ATI") and LighTekton Co., Ltd ("LighTekton") to manufacture and distribute our products in China. This collaboration provides us with access to a potential $2.5 billion market opportunity. By leveraging ATI's and LighTekton's extensive networks and manufacturing capabilities, we aim to accelerate our market penetration and deliver our advanced lidar solutions to a broader audience.

Current wording

In May 2024, we announced a strategic partnership with Accelight Technologies, Inc. ("ATI") and LighTekton Co., Ltd ("LighTekton") to manufacture and distribute our products in China. By leveraging ATI's and LighTekton's extensive networks and manufacturing capabilities, we aim to accelerate our market penetration and deliver our advanced lidar solutions to a broader audience. However, recent U.S. and Chinese governmental actions affecting lidar and related technologies may limit our ability to pursue opportunities in China, as described in Part II, Item 1A, “Risk Factors.”

Previous wording

During the second quarter of 2026, we partnered with MoveAWheeL to explore combining Apollo’s™ long-range 3D object detection with MoveAWheeL’s acoustic road-surface friction sensing, with the goal of providing real-time predictive road-surface friction data to improve advanced driver-assistance and autonomous driving performance in adverse weather. Evaluations are underway in select geographies, however there can be no assurance that it will result in a commercial relationship or in commercial sales for us.

Current wording

During the second quarter of 2026, we partnered with MoveAWheeL to explore combining the long-range 3D object detection capabilities of Apollo™ with MoveAWheeL’s acoustic road-surface friction sensing, with the goal of providing real-time predictive road-surface friction data to improve advanced driver-assistance and autonomous driving performance in adverse weather. Evaluations are underway in select geographies; however, there can be no assurance that they will result in a commercial relationship or in commercial sales for us.

Previous wording

In aerospace and defense, our customer engagements continued to increase during the second quarter of 2026, with multiple repeat orders from existing customers and active development across multiple programs. We are being evaluated for expanded use cases with these customers, and expect to receive additional requests for quotation in the near term. While we are encouraged by the trajectory of these engagements, there can be no assurance that they will translate into commercial sales for us.

Current wording

In aerospace and defense, our customer engagements continued to increase during the first nine months of 2026, with multiple repeat orders from existing customers and active development across multiple programs. During the third quarter of 2026, we recognized our first STRATOS™ revenue for a counter-unmanned aircraft system application, and to date, received a fifth purchase order from our lead defense customer. In addition, Section 164 of the National Defense Authorization Act for Fiscal Year 2025, which took effect on June 30, 2026, prohibits the U.S. Department of Defense from procuring or operating lidar produced in China and certain other countries, which we believe may increase demand among U.S. defense customers for lidar from U.S. and allied nation suppliers such as AEye. We are being evaluated for expanded use cases with these customers, and expect to receive additional requests for quotation in the near term. While we are encouraged by the trajectory of these engagements, there can be no assurance that they will translate into commercial sales for us.

Previous wording

We believe our revenue and profitability will also be dependent upon our success in licensing our technology to Tier 1 automotive suppliers, such as our current Tier 1 partner, LITEON, and these partners securing program awards from OEMs and scaling to high volume production of our lidar sensors. Delays in autonomy programs by OEMs that we are currently or plan to be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the time frame we anticipate, or at all.

Current wording

Over the longer term, any Automotive revenue will depend on our Tier 1 partners, such as LITEON, including through potential licensing arrangements, and on those partners securing OEM program awards and scaling to high-volume production. Delays in autonomy programs by OEMs that we are currently or plan to be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the time frame we anticipate, or at all.

Previous wording

While our commercial activities remain primarily focused in North America, we are also actively engaging with customers in EMEA and APAC. Our APAC strategy has begun to evolve through business development activities in Korea, where we have established on-the-ground support and have engaged with multiple customers across the ITS, rail, and mobility sectors. In China, we have multiple customer evaluations in progress, supported by our existing partnerships with ATI and LighTekton. Additional proof-of-concept activity is underway in other geographies, including Australia and Thailand. There can be no assurance that any of these international engagements will result in commercial sales for us.

Current wording

While our commercial activities remain primarily focused in North America, we are also actively engaging with customers in EMEA and APAC. Our APAC strategy has begun to evolve through business development activities in Korea, where we have established on-the-ground support and have engaged with multiple customers across the ITS, rail, and mobility sectors. In China, our activities remain limited to evaluations supported by our partnerships with ATI and LighTekton. The China market is characterized by intense pricing pressure from local lidar manufacturers, which makes it difficult for us to compete on price, and recent governmental actions may further limit our ability to pursue opportunities there . Additional proof-of-concept activity is underway in other geographies, including Australia and Japan. There can be no assurance that any of these international engagements will result in commercial sales for us.

Previous wording

Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of our development contracts with customers, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features. Our gross margins have and may continue to be negatively impacted by inventory write-downs. In the future, we expect to generate attractive gross margins from licensing our lidar technology and software to our Tier 1 partners in the Automotive market. We also anticipate being able to leverage our foundation in the Automotive market to be more cost competitive in other markets.

Current wording

Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of contracts to develop and deliver products designed to meet customer requirements, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features. Our gross margins have been, and may continue to be, negatively impacted by inventory write-downs.

Previous wording

To date, we have primarily generated revenue through sales of our products to Non‑Automotive customers and through development contracts with OEMs, Tier 1 suppliers and other customers. Non‑Automotive applications typically command higher average selling prices and may carry higher gross margins than Automotive programs due to lower volume sensitivity, more specialized operating requirements, and greater willingness by customers to pay for performance differentiation. These engagements often involve customization of our product’s capabilities to address application‑specific needs, including software‑based configuration of scan patterns, region‑of‑interest tuning, advanced perception features, and other enhancements. In many cases, customers require more complex configurations or software‑enabled feature additions, which allows us greater latitude to price these solutions at a premium. As a result, customized Non‑Automotive deployments generally reflect higher contractual pricing and may contribute more favorably to gross margin relative to standard Automotive configurations.

Current wording

Recently, we have primarily generated revenue through sales of our products with Non‑Automotive customers. Non‑Automotive applications typically command higher average selling prices and may carry higher gross margins than Automotive programs due to lower volume sensitivity, more specialized operating requirements, and greater willingness by customers to pay for performance differentiation. These engagements often involve customization of our product’s capabilities to address application‑specific needs, including software‑based configuration of scan patterns, region‑of‑interest tuning, advanced perception features, and other enhancements. In many cases, customers require more complex configurations or software‑enabled feature additions, which allow us greater latitude to price these solutions at a premium. As a result, customized Non‑Automotive deployments generally reflect higher contractual pricing and may contribute more favorably to gross margin relative to standard Automotive configurations. Services under our subcontract with Lunar Outpost, may carry lower or negative margins in early periods, as we incur engineering, outside services, and materials costs ahead of potential higher-margin production or follow-on business. For the three months ended September 30, 2026, our gross margin improved to (35)% from (106)% for the three months ended September 30, 2025, primarily due to a mix of product revenue, lower product costs, and lower warranty reserves reflecting lower return rates for Apollo™ and lower replacement costs. As production volumes increase, we expect product costs to continue to decline through bill-of-material reductions and manufacturing efficiencies; however, there can be no assurance that we will achieve these reductions or positive gross margins

Previous wording

Our next‑generation lidar portfolio is built on our Intelligent Sensing Platform, a modular and software‑defined architecture that allows us to create differentiated product offerings with limited incremental hardware changes. By maintaining a common core design and enabling performance enhancements through software—such as configurable scan patterns, range distribution, and perception features—we are able to address diverse application requirements while minimizing the operational complexity typically associated with managing a large product portfolio. This platform‑based approach also allows us to introduce new products efficiently. For example, STRATOS™, launched in January 2026, is derived from the Apollo's TM architecture but offers extended range and higher angular resolution to support long‑distance and higher‑performance applications.

Current wording

Our next‑generation lidar portfolio is built on our Intelligent Sensing Platform, a modular and software‑defined architecture that allows us to create differentiated product offerings with limited incremental hardware changes. By maintaining a common core design and enabling performance enhancements through software—such as configurable scan patterns, range distribution, and perception features—we are able to address diverse application requirements while minimizing the operational complexity typically associated with managing a large product portfolio. This platform‑based approach also allows us to introduce new products efficiently.

Previous wording

In June 2024, we introduced Apollo TM, our next generation lidar sensor. Apollo TM offers best-in-class range and resolution in a compact, power-efficient, and cost-effective form factor, making it ideal for both automotive and non-automotive applications. Apollo TM can be integrated behind the windshield, on the roof, or in the grille, allowing OEMs to implement essential safety features with minimal impact on vehicle design. This innovative sensor leverages our Intelligent Sensing Platform, providing a highly programmable and customizable lidar solution that can be continually enhanced via software updates. With a horizontal field of view up to 120° and long-range detection capabilities of up to one kilometer, Apollo TM is poised to be a key player in advancing vehicle safety and autonomy, as well as smart infrastructure and logistics applications.

Current wording

In June 2024, we introduced Apollo™, our next-generation lidar sensor. Apollo™ offers best-in-class range and resolution in a compact, power-efficient, and cost-effective form factor, making it ideal for both automotive and non-automotive applications. Apollo™ can be configured and mounted to meet a wide range of application requirements, from fixed infrastructure to mobile platforms, and behind the windshield, on the roof, or in the grille, allowing OEMs to implement essential safety features with minimal impact on vehicle design. This innovative sensor leverages our Intelligent Sensing Platform, providing a highly programmable and customizable lidar solution that can be continually enhanced via software updates. With a horizontal field of view up to 120° and long-range detection capabilities of up to one kilometer, Apollo TM is designed to support smart infrastructure, defense, logistics and vehicle safety applications.

Previous wording

Building on this foundation, we launched OPTIS™ in July 2025, a complete physical AI solution that extends our capabilities beyond automotive. OPTIS™ combines Apollo’s TM software-defined lidar with advanced computing to deliver actionable intelligence for modernizing legacy infrastructure. This platform not only addresses critical needs in transportation, safety, and security but also opens our ecosystem to third-party partners and developers, fostering innovation across industries. Since launch, OPTIS™ has moved from concept to structured offering, with initial deployments completed and new partners such as Black Sesame Technologies, BlueBand, Flasheye, and Vueron joining our network. In addition, in January 2026, we announced STRATOS™, the next product in this family. STRATOS™ is based on the same underlying architecture as Apollo™ but offers extended detection range of up to approximately 1.5 kilometers and roughly twice the angular resolution. STRATOS™ is intended for applications that require enhanced long‑distance performance or operate at higher speeds, including certain automotive, infrastructure, defense, and industrial sensing environments. Like Apollo™, STRATOS™ leverages our software‑defined sensing approach, enabling performance updates without a hardware redesign.

Current wording

Building on this foundation, we launched OPTIS™ in July 2025, a complete physical AI solution that extends our capabilities beyond automotive. OPTIS™ combines Apollo™ software-defined lidar with advanced computing to deliver actionable intelligence for modernizing legacy infrastructure. This platform not only addresses critical needs in transportation, safety, and security but also opens our ecosystem to third-party partners and developers, fostering innovation across industries. Since launch, OPTIS™ has moved from concept to structured offering, with initial deployments completed and new partners such as Black Sesame Technologies, Blue-Band, Flasheye, and Vueron joining our network. In addition, in January 2026, we announced STRATOS™, the next product in this family. STRATOS™ is based on the same underlying architecture as Apollo™ but offers extended detection range of up to approximately 1.5 kilometers and roughly twice the angular resolution. STRATOS™ is intended for applications that require enhanced long‑distance performance or operate at higher speeds, including certain automotive, infrastructure, defense, and industrial sensing environments. Like Apollo™, STRATOS™ leverages our software‑defined sensing approach, enabling performance updates without a hardware redesign.

Previous wording

We believe the software-defined nature of our architecture has increasingly been a factor in customer evaluations and selections. Because Apollo™ and STRATOS™ are built on a common software-defined platform, customers can configure range, resolution, and field of view, and enable perception features, through software rather than hardware changes, allowing a single architecture to address application-specific requirements across automotive, commercial trucking, aerospace and defense, intelligent transportation systems and other industries. There can be no assurance, however, that this differentiation will result in design wins or commercial sales for us.

Current wording

We believe the software-defined nature of our architecture has increasingly been a factor in customer evaluations and selections. Because Apollo™ and STRATOS™ are built on a common software-defined platform, customers can configure range, resolution, and field of view, and enable perception features, through software rather than hardware changes, allowing a single architecture to address application-specific requirements across automotive, commercial trucking, aerospace and defense, intelligent transportation systems and other industries. We believe the combination of long-range performance and software configurability allows us to enter new markets, such as space mobility and sports analytics, without developing application-specific hardware, and to aggregate volume across markets on a common bill of materials and production line, which we believe supports lower product costs over time. There can be no assurance, however, that this differentiation will result in design wins or commercial sales for us.

Previous wording

We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position. This is further dependent on the investments we make in research and development and our ability to commercialize our products. We believe price is becoming a critical differentiator in the marketplace and OEMs are favoring companies that have the infrastructure to build lower cost products at higher volumes. It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products, lower bill of materials, or BOM costs, industrialize the manufacturing process, and generate strong market demand for our products. If we fail to do this, our market position and revenue may be adversely affected, and our investments in that area will not be recovered.

Current wording

We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position. This is further dependent on the investments we make in research and development and our ability to commercialize our products. We believe price is becoming a critical differentiator in the marketplace and customers are favoring companies that have the infrastructure to build lower cost products at higher volumes. As customers move from evaluation to production, we are experiencing pressure to lower our average selling prices, and the production pricing expectations of certain customers are below our current pricing. If we are unable to reduce our product costs in line with these expectations, or if we must lower prices before we achieve corresponding cost reductions, our revenue and gross margins could be adversely affected. It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products, lower bill of materials, or BOM costs, industrialize the manufacturing process, and generate strong market demand for our products. If we fail to do this, our market position and revenue may be adversely affected, and our investments in that area will not be recovered.

Previous wording

Our product revenue primarily relates to unit sales of our lidar units, software, and support. Revenue from these sales is typically recognized at a point in time when the control of the goods is transferred to the customer, generally upon delivery of or shipment to the customer, or when services have been provided. Revenue from development and/or collaboration contracts are earned from R&D activities and collaboration with OEMs, Tier 1 suppliers and other customers. These contracts primarily focus on customization of our product's capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs. Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time. This assessment is made at the outset of the arrangement for each performance obligation.

Current wording

Our product revenue primarily relates to unit sales of our lidar units, software, and support. Revenue from these sales is typically recognized at a point in time when the control of the goods is transferred to the customer, generally upon delivery of or shipment to the customer, or when services have been provided.

Previous wording

Cost of revenue includes costs directly associated with the production of lidar units, cost of software and support, and certain costs associated with development contracts. Such costs for the products include direct materials, direct labor, indirect labor, inventory write downs, losses on purchase commitments, warranty expense, and allocation of overhead. As we increase the volume of Apollo TM units that are manufactured, we expect the bill of material costs to decrease over time. Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts.

Current wording

Cost of revenue includes costs directly associated with the production of lidar units, cost of software, and support. Such costs for the products include direct materials, direct labor, indirect labor, inventory write-downs, losses on purchase commitments, warranty expense, and allocation of overhead. As we increase the volume of Apollo TM units that are manufactured, we expect the bill of materials costs to decrease over time.

Previous wording

The changes in fair value of the convertible note and warrant liabilities are the result of the change in fair value at each reporting date. The convertible note and warrant liabilities were recorded at fair value for each reporting period, and the changes in fair value were reported within other income (expense), net during the period. We also elected to record interest expense on the convertible note as changes in fair value. We have fully repaid the 2025 Note in 2025. We expect the change in fair value of warrant liabilities to decrease as the warrant associated with the 2022 Note was cancelled and the warrant associated with the 2025 Note was exercised in full in 2025.

Current wording

The changes in fair value of the convertible note and warrant liabilities are the result of the change in fair value at each reporting date. The convertible note and warrant liabilities were recorded at fair value for each reporting period, and the changes in fair value were reported within other income (expense), net during the period. We also elected to record interest expense on the convertible note as changes in fair value. We fully repaid the 2025 Note in 2025. We expect the change in fair value of warrant liabilities to decrease as the warrant associated with the 2022 Note was cancelled, the warrant associated with the 2025 Note was exercised in full in 2025, and the Private Placement Warrants expired in August 2026. The remaining warrant liability relates to the warrant issued in connection with the lease settlement.

Previous wording

Interest income and other consists primarily of interest and investment income earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash, cash equivalents, and marketable securities balances and market rates. Interest income and other also includes gains on sale of property and equipment. Interest expense and other consists primarily of financing costs, amortization of premiums and accretion of discounts on marketable securities, net, and foreign exchange gains and losses.

Current wording

Interest income and other consists primarily of interest and investment income earned on our cash, cash equivalents, and marketable securities. These amounts will vary based on our cash, cash equivalents, and marketable securities balances and market rates. Interest income and other also includes gains on sale of property and equipment. Interest expense and other consists primarily of financing costs, amortization of premiums and accretion of discounts on marketable securities, net, foreign exchange gains and losses and interest accrued on arbitration award balances.

Previous wording

Revenues increased by $180, or 818%, to $202 for the three months ended June 30, 2026, from $22 for the three months ended June 30, 2025. This increase is primarily due to the higher volume of Apollo TM lidar units sold and higher contract development revenues during the quarter.

Current wording

Revenues increased by $456, or 912%, to $506 for the three months ended September 30, 2026, from $50 for the three months ended September 30, 2025. This increase is primarily due to the higher volume of Apollo TM lidar units sold and higher revenues from contracts to develop and deliver products designed to meet customer requirements, which are recognized over time.

Previous wording

Cost of revenue increased by $255, or 236%, to $363 for the three months ended June 30, 2026, from $108 for the three months ended June 30, 2025. This increase was primarily due to the higher volume of product sales in the current quarter.

Current wording

Cost of revenue increased by $581, or 564%, to $684 for the three months ended September 30, 2026, from $103 for the three months ended September 30, 2025. This increase was primarily due to the higher volume of product sales and costs to satisfy performance obligations for contracts to develop and deliver products designed to meet customer requirements in the current quarter.

Previous wording

Research and development expenses increased by $1,073, or 29%, to $4,743 for the three months ended June 30, 2026, from $3,670 for the three months ended June 30, 2025. This increase was primarily driven by an increase in personnel costs, net of allocations, of $307, increased fees paid to third party development work of $314, allocated information technology and facilities expense of $135, engineering parts and lab equipment and other research and development expenses of $271.

Current wording

Research and development expenses increased by $1,557, or 51%, to $4,618 for the three months ended September 30, 2026, from $3,061 for the three months ended September 30, 2025. This increase was primarily driven by an increase in personnel costs, net of allocations, of $439, increased stock-based compensation of $158, increased fees paid for third party development work of $406, increased engineering parts, lab equipment and other research and development expenses of $426, and higher allocated information technology and facilities expense of $122.

Previous wording

Sales and marketing expenses increased by $546, or 91%, to $1,147 for the three months ended June 30, 2026, from $601 for the three months ended June 30, 2025. This increase was primarily driven by increases in personnel costs, including allocations, of $159 and marketing, trade show and consultant expenses of $277 as we continue to invest in sales and marketing activities to build brand awareness and expand our commercial pipeline.

Current wording

Sales and marketing expenses increased by $606, or 96%, to $1,237 for the three months ended September 30, 2026, from $631 for the three months ended September 30, 2025. This increase was primarily driven by increases in personnel costs, including allocations, of $109, stock-based compensation of $206, and increased travel, marketing, trade show and consultant expenses of $195 as we continue to invest in sales and marketing activities to build brand awareness and expand our commercial pipeline.

Previous wording

Change in fair value of convertible note and warrant liabilities decreased by $723 to $130 for the three months ended June 30, 2026, from $593 for the three months ended June 30, 2025. This decrease was primarily due to the change in fair value of the 2025 Note and warrants related to the 2025 Note and 2022 Note, which were fully settled or cancelled in 2025.

Current wording

Change in fair value of convertible note and warrant liabilities decreased by $2,285 to a gain of $75 for the three months ended September 30, 2026, from an expense of $2,210 for the three months ended September 30, 2025. This favorable change was primarily due to the change in fair value of the 2025 Note and warrants related to the 2025 Note and 2022 Note, which were fully settled or cancelled in 2025.

Previous wording

Interest income and other increased by $629, or 104%, to $1,236 for the six months ended June 30, 2026, from $607 for the six months ended June 30, 2025. This increase was primarily due to higher interest earned on our cash, cash equivalents, and marketable securities in the current period.

Current wording

Interest income and other decreased by $104, or 16%, to $546 for the three months ended September 30, 2026, from $650 for the three months ended September 30, 2025. This decrease was primarily due to lower interest earned on our cash, cash equivalents, and marketable securities in the current period.

Previous wording

Interest expense and other decreased by $377, to a net income of $12 for the three months ended June 30, 2026, from a net expense of $365 for the three months ended June 30, 2025. This decrease was primarily due to a decrease in costs related to financing arrangements of $134 and lower foreign exchange losses (gains), net, of $230.

Current wording

Interest expense and other increased by $626, to a net expense of $571 for the three months ended September 30, 2026, from a net income of $55 for the three months ended September 30, 2025. This increase was primarily due to increased costs related to financing arrangements of $395 and interest accrued on the arbitration award balance of $270 in the current quarter.

Previous wording

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report. The following table sets forth our consolidated results of operations data for the six months ended June 30, 2026 and 2025 (in thousands, except for percentages):

Current wording

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report. The following table sets forth our consolidated results of operations data for the nine months ended September 30, 2026 and 2025 (in thousands, except for percentages):

Previous wording

Cost of revenue increased by $360, or 176%, to $564 for the six months ended June 30, 2026, from $204 for the six months ended June 30, 2025. This increase was primarily due to higher volumes of product sales during the year.

Current wording

Cost of revenue increased by $941, or 307%, to $1,248 for the nine months ended September 30, 2026, from $307 for the nine months ended September 30, 2025. This increase was primarily due to higher volumes of product sales and costs to satisfy performance obligations for contracts to develop and deliver products designed to meet customer requirements during the nine month period.

Previous wording

Research and development expenses increased by $1,348, or 19%, to $8,508 for the six months ended June 30, 2026, from $7,160 for the six months ended June 30, 2025. This increase was primarily driven by an increase in personnel costs, net of allocations, of $844. The increase was also related to increased fees paid to third party development work of $347, engineering parts and lab equipment of $194, other research and development expenses of $279, and allocated information technology and facilities expense of $145. These increases were partially offset by a decrease in stock-based compensation expense of $496.

Current wording

Research and development expenses increased by $2,905, or 28%, to $13,126 for the nine months ended September 30, 2026, from $10,221 for the nine months ended September 30, 2025. This increase was primarily driven by an increase in personnel costs, net of allocations, of $1,283. The increase was also related to increased fees paid for third-party development work of $753, increased engineering parts and lab equipment of $477, higher other research and development expenses of $422, and higher allocated information technology and facilities expense of $267. These increases were partially offset by a decrease in stock-based compensation expense, net of allocations, of $338.

Previous wording

Sales and marketing expenses increased by $1,149, or 117% to $2,133 for the six months ended June 30, 2026, from $984 for the six months ended June 30, 2025. This increase was primarily driven by increases in personnel costs, net of allocations, of $519, and increased travel, marketing, trade show and consultant expenses of $510, as we continue to invest in sales and marketing activities to build brand awareness and expand our commercial pipeline.

Current wording

Sales and marketing expenses increased by $1,755, or 109% to $3,370 for the nine months ended September 30, 2026, from $1,615 for the nine months ended September 30, 2025. This increase was primarily driven by increases in personnel costs, net of allocations, of $627, increased stock-based compensation of $202, and increased travel, marketing, trade show and consultant expenses of $705 as we continue to invest in sales and marketing activities to build brand awareness and expand our commercial pipeline.

Previous wording

General and administrative expenses increased by $1,639, or 23%, to $8,882 for the six months ended June 30, 2026, from $7,243 for the six months ended June 30, 2025. This increase was primarily driven by a favorable adjustment of $1,612 upon settlement of a lease dispute during the six months ended June 30, 2025. The increase was also due to higher stock-based compensation of $800, partially offset by decreases in personnel costs, net of allocations, of $198, professional fees and stock related costs of $409, and insurance expense of $92.

Current wording

General and administrative expenses increased by $2,820, or 25%, to $14,143 for the nine months ended September 30, 2026, from $11,323 for the nine months ended September 30, 2025. This increase was primarily driven by the absence in the current period of a net gain of $1,014 which was recorded as a reduction of general and administrative expense upon settlement of a lease dispute during the nine months ended September 30, 2025. The increase was also due to higher stock-based compensation of $2,594, partially offset by decreases in professional fees and stock related costs of $589, and insurance expense of $125.

Previous wording

Change in fair value of convertible note and warrant liabilities decreased by $62 to a favorable change of $149 for the six months ended June 30, 2026, from a favorable change of $87 for the six months ended June 30, 2025. This decrease was primarily due to the change in fair value of the 2025 Note and warrants related to the 2025 Note and 2022 Note, which were fully settled or cancelled in 2025.

Current wording

Change in fair value of convertible note and warrant liabilities changed favorably by $2,347 to a net income of $224 for the nine months ended September 30, 2026, from an expense of $2,123 for the nine months ended September 30, 2025. This change was primarily due to the change in fair value of the 2025 Note and warrants related to the 2025 Note and 2022 Note, which were fully settled or cancelled in 2025.

Previous wording

Interest income and other increased by $198, or 50%, to $591 for the three months ended June 30, 2026, from $393 for the three months ended June 30, 2025. This increase was primarily due to higher interest earned on our cash, cash equivalents, and marketable securities in the current period.

Current wording

Interest income and other increased by $525, or 42%, to $1,782 for the nine months ended September 30, 2026, from $1,257 for the nine months ended September 30, 2025. This increase was primarily due to higher interest earned on our cash, cash equivalents, and marketable securities in the current period.

Previous wording

Interest expense and other decreased by $2,507, to a net income of $34 for the six months ended June 30, 2026, from a net expense of $2,473 for the six months ended June 30, 2025. This decrease was primarily due to a decrease in costs related to financing arrangements of $2,020 and lower foreign exchange losses (gains), net, of $402.

Current wording

Interest expense and other decreased by $1,881, to $537 for the nine months ended September 30, 2026, from $2,418 for the nine months ended September 30, 2025. This decrease was primarily due to a decrease in costs related to financing arrangements of $1,698 and lower foreign exchange losses (gains), net, of $414, partially offset by an increase in interest accrued on the arbitration award balance due of $270.

Previous wording

Net loss increased by $1,081, or 6%, to $18,367 for the six months ended June 30, 2026, from $17,286 for the six months ended June 30, 2025. This increase was primarily due to increased facilities costs as a result of the favorable adjustment from the settlement of a lease dispute in the prior year. The increase is also due higher personnel costs and stock-based compensation, increased engineering spend and increased business development and marketing activities, partially offset by decreased financing costs.

Current wording

Net loss increased by $2,995, or 11%, to $29,611 for the nine months ended September 30, 2026, from $26,616 for the nine months ended September 30, 2025. The increase is primarily due to higher personnel costs and stock-based compensation, increased engineering spend and higher business development and marketing activities, partially offset by a decrease in the change in fair value of convertible note and warrant liabilities. The increase also reflects the absence in the current period of the net gain recorded in the prior-year period upon settlement of a lease dispute.

Previous wording

Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to establish and maintain a relationship with one or more Tier 1 automotive suppliers and the timing of any OEM design wins, our ability to effectively and efficiently manage our expenses, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products, and the market adoption of new and enhanced products and features. To date, our principal sources of liquidity have been the proceeds received from the issuance of equity and convertible notes.

Current wording

Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, the timing of design wins and production orders from Non-Automotive customers and, over the longer term, Automotive programs through our Tier 1 partners, our ability to effectively and efficiently manage our expenses, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products, and the market adoption of new and enhanced products and features. To date, our principal sources of liquidity have been the proceeds received from the issuance of equity and convertible notes.

Previous wording

On September 26, 2023, the U.S. Securities and Exchange Commission declared our Registration Statement on Form S-3 effective (the "Shelf"), which allows us to raise up to $200,000 in capital over the following three years. The use of the Shelf was subject to a limitation of one-third of our public float in any rolling twelve-month period, when our public float was below $75,000, which is commonly referred to as the “baby shelf" rules. Since July 28, 2025, we have not been subject to the "baby shelf" rules. Since the Shelf was established, we have used the Shelf to register the shares sold in the May 29, 2024 Registered Direct Offering and the September 12, 2024 A.G.P. Transaction, both of which are further described below. The Shelf is scheduled to expire in September 2026, and on May 19, 2026, we filed a replacement registration statement on Form S-3 (the “2026 Shelf”) to maintain our capacity to raise capital. The 2026 Shelf registers the offering and sale, from time to time, of up to $200,000 of our common stock, preferred stock, debt securities, warrants, rights, and units, in one or more offerings. The 2026 Shelf had not been declared effective by the SEC as of the date of this Quarterly Report.

Current wording

On September 26, 2023, the U.S. Securities and Exchange Commission ("SEC") declared our Registration Statement on Form S-3 effective (the "Shelf"), which allows us to raise up to $200.0 million in capital over the following three years. The use of the Shelf was subject to a limitation of one-third of our public float in any rolling twelve-month period, when our public float was below $75.0 million. Since the Shelf was established, we used the Shelf to register the shares sold in the May 29, 2024 Registered Direct Offering and the September 12, 2024 A.G.P. Transaction, both of which are further described below. The Shelf expired in September 2026.

Previous wording

On July 25, 2024, we entered into a Stock Purchase Agreement with New Circle Principal Investments LLC, or New Circle, pursuant to which we have the right, but not the obligation, to sell to New Circle, and New Circle is obligated to purchase, up to $50,000 of our common stock. Such sales of common stock by us, if any, may occur from time to time at our sole discretion, over a 36-month period. In December 2025, we terminated the agreement with New Circle. The termination was part of our broader effort to simplify our capital structure and reduce the number of outstanding financing instruments, while consolidating our equity financing capacity under our existing at‑the‑market facility, which we believe provides more operational flexibility and alignment with our long‑term capital strategy. In total, we issued 8,980,713 shares of our common stock to New Circle under the agreement for gross proceeds totaling $27,754.

Current wording

On July 25, 2024, we entered into a Stock Purchase Agreement with New Circle Principal Investments LLC, or New Circle, pursuant to which we had the right, but not the obligation, to sell to New Circle, and New Circle was obligated to purchase, up to $50,000 of our common stock. Such sales of common stock by us, if any, may occur from time to time at our sole discretion, over a 36-month period. In December 2025, we terminated the agreement with New Circle. The termination was part of our broader effort to simplify our capital structure and reduce the number of outstanding financing instruments, while consolidating our equity financing capacity under our existing at‑the‑market facility, which we believe provides more operational flexibility and alignment with our long‑term capital strategy. In total, we issued 8,980,713 shares of our common stock to New Circle under the agreement for gross proceeds totaling $27,754.